US Inflation Data and Soaring Oil Prices Push Wall Street and Global Markets Lower
Market Reactions to Inflation, Oil Prices, and Central Bank Actions
By Marc Jones and Pete Schroeder
US Inflation and Market Anxiety
LONDON/WASHINGTON, Sept 10 (Reuters) - U.S. stocks fell and yields rose on Thursday following another rise in key U.S. inflation data that added to market anxiety, while the ECB lifted its interest rates for a second time this year and the U.S. and Iran clashed in the Strait of Hormuz.
Oil Prices and Inflation Concerns
Oil prices remained a concern for investors after Brent crude climbed above $100 a barrel on Wednesday for the first time since July, raising fears of renewed inflation pressure just as bond yields in major economies hover near multidecade highs.
Wall Street and Global Stock Performance
Wall Street declined again with the Dow Jones Industrial Average and S&P 500 off 0.6% and the Nasdaq Composite down 0.65%. MSCI's gauge of stocks worldwide was down 0.66%.
Central Bank Decisions and Bond Yields
ECB Interest Rate Hike
The European Central Bank's decision to raise its key interest rate to 2.50% from 2.25% on Thursday came as little surprise given the recent signals, and barely moved the region's stock markets [.EU] and the euro.
Rising Bond Yields Across Major Economies
Germany's 10-year bond yield rose 5 basis points to 3.50%, the highest since the heat of the euro zone crisis in April 2011, while France's OAT yield was at another post-2008 high of 4.33%.
Away from the euro zone, Britain's 10-year yields surpassed post-2007 highs at 5.39% and benchmark 10-year U.S. Treasury yields ticked up to 4.96%.
US Fiscal Policy and Market Expectations
Trump Dividend and Treasury Buybacks
Investors were also digesting signs of looser U.S. fiscal policy after President Donald Trump promised to pay every U.S. adult a $5,000 "Trump dividend" if his party wins November's congressional elections. The Treasury Department had also announced a $6 billion buyback of longer-dated U.S. bonds that disappointed some investors.
Federal Reserve Rate Expectations
Heading into Thursday's Producer Price Index report, a majority of economists polled by Reuters expected the Fed to hold interest rates steady at its September 15-16 meeting and for the rest of this year, but those expectations swung to a rise in rates this month with the release of another firm report. Attention will now turn to Friday's U.S. consumer price update.
Oil Market Volatility and Investor Sentiment
Oil Pressure
OIL PRESSURE
Brent Crude Surge and Middle East Tensions
In the commodity markets, Brent crude futures jumped another 7% to $108.64 a barrel amid the re-escalation of the Iran war and as traders grappled with the prospect of yet more inflationary pressure. [O/R]
"I think that Brent pushing through the $100 level will be seen by many in the market as a significant event in the current scheme of things," said Nick Twidale, chief market strategist at ATFX Global.
Twidale said traders who had been holding off in hopes of a Middle East peace deal may now "hit the trigger as the realities of a longer conflict kick in."
Bond Market Focus and Treasury Actions
Investor attention will stay on the bond market. After the global selloff pushed 30-year yields to their highest level since 2007, Treasury Secretary Scott Bessent in August said that the government would increase buybacks of longer-dated bonds.
"Bessent has laid down the gauntlet to a group of sophisticated traders who don't like to be told what to do," said Matt Simpson, senior market analyst at StoneX.
"He may win a battle or two, but he'll only win the war if bond traders let him."
(Reporting by Marc Jones and Pete Schroeder; Editing by Elaine Hardcastle, Joe Bavier, Colin Barr and Edmund Klamann)
